FY26 could be a constructive year for FII flows: Pranav Haridasan, Axis Sec

Haridasan believes that the 90-day pause on the new US reciprocal tariffs provides temporary relief but does not eliminate the uncertainty

Financial year 2025-26 (FY26) has started with US President Donald Trump unleashing tariffs on the US' trading partners. While this stoked fears of a trade war, PRANAV HARIDASAN, managing director and chief executive officer of Axis Securities, believes the 'China+1' narrative could offer a long-term advantage to India. In an email interview with Devanshu Singla, Haridasan shares insights on India's evolving position in global supply chains, US tariff risks, FII flows, and sectoral trends. Edited excerpts:

 

How do you view the 90-day pause on US tariffs and its impact on Indian markets?

The 90-day pause on the new US reciprocal tariffs provides temporary relief but does not eliminate the uncertainty. The 10-per cent uniform tariffs are still in effect, and retaliation from China suggests that we are far from resolution. While India may not be directly impacted, we are seeing ripple effects.

 

Export-heavy sectors like IT, pharma, and autos will have to navigate this carefully as their guidance, margins, and deal flow could come under some pressure if global growth softens further. However, the China+1 narrative could offer a long-term advantage to India.

 

Given this, domestic-facing sectors like consumption, banks, and infrastructure are better insulated. We remain Neutral to Underweight on IT, at least in the near-term, till the fog lifts on outlook.

How are FIIs responding to India's post-tariff position? Will FY26 see a rebound in flows?

FY26 could be a more constructive year for foreign inflows. Measures like a cut in the cash reserve ratio (CRR) by the Reserve Bank of India (RBI), a consumption-focused Budget, and dovish pivots, globally, are positive. In addition, improving earnings visibility should bring FIIs back, especially to large-caps and fundamentally strong plays.

 

That said, valuations remain elevated and the global macro backdrop demands caution. FIIs are likely to adopt a barbell approach where they would balancing high-quality structural stories with tactical opportunities. While flows in FY26 may be more discerning, India continues to hold structural appeal in the emerging market (EM) basket.

What was the stand out factor, in terms of investing, in FY25, and what's your FY26 outlook?

Discipline and asset allocation mattered more-than-ever in FY25. With so much global churn, those who stuck to a long-term process and avoided the noise performed well. It reinforced the need for goal-based investing, rebalancing, and staying invested through cycles.

 

Heading into FY26, I am constructive on India. Large-cap stocks look more reasonably priced than mid and small-caps. Domestic sectors like banks, industrials, and capital goods are well-positioned given their strong balance sheets, policy push, and capex revival.

 

On the other hand, export-oriented sectors like specialty chemicals, auto ancillaries, and precision manufacturing could surprise if global trade stabilises and China+1 gains momentum. These "under-loved" spaces might become the dark horses.

What's your view on the broking industry outlook for FY26 amid rising compliance costs?

The outlook is more constructive than six months ago. Compliance costs linked to F&O norms, depository participant's AMC charges, and transaction fees led to retail participation dropping and overall volumes contracting.

 

The worst, however, is behind us and we are seeing signs of normalisation. As participants adjust and confidence rebuilds, volumes should recover in a sustainable fashion.

 

Well-capitalised brokers with technology, compliance infrastructure, and client-centric platforms are well-positioned to gain share as the dust settles. If not explosive growth, FY26 could bring consolidation and sustainable volume recovery for differentiated players.

Did year-end volatility impact Axis Securities' business? How are you ensuring client stickiness?

Axis Securities uses such phases as opportunities to reinforce long-term conviction, disciplined execution, and strong research. Our high-conviction ideas like Top Picks and Axis Punch held up well. We focused on technology by offering real-time insights, intuitive dashboards, and seamless user experience.

 

Transparent communication, education-first advisory, and consistent client engagement remained non-negotiable.